Research and Development

The importance of research and development (R&D) investment is a central theme of the economic literature on economic growth. Economic analysis suggests that R&D investment is crucial for attaining increases in labor productivity that ultimately translate into improvements in prosperity. R&D investment is at the center of an innovation strategy and this indicator measures the extent to which the state’s businesses and universities are engaged in research and development.

The investment of the state’s public universities and businesses in R&D per $1 million of gross domestic product (GDP) is reported on Arizona Indicators. The academic R&D data are reported by source of the funding. The major sources are the federal government and “institutions” — the universities themselves.

Data Source:

National Science Foundation, Division of Science Resources Statistics. The industry R&D data are from the Business R&D and Innovation Survey: http://www.nsf.gov/statistics/industry/. The path to the table that provides the data used in Arizona Indicators is “geographic distribution/by state/funds: selected years.” Data for prior years may be revised. The tables are updated on an inconsistent basis; the latest data are sometimes reported in a “brief” that is released about 18 months after the end of a year. The academic R&D data, from the NSF Survey of Research and Development Expenditures at Universities and Colleges/Higher Education Research and Development Survey, are reported by fiscal year, available at https://webcaspar.nsf.gov/. The data are released around 18 months after the end of a calendar year; data for prior years may be revised.

The R&D data are derived from a survey.The industrial data in particular are subject to survey error; companies may be reluctant to disclose the amount of R&D that takes place at any particular facility. Industrial R&D by state was reported only for selected years prior to 1997; interpolated values for the missing years are shown in the chart. Some of the inputs to the calculation of GDP by state are estimated.

Visualization Notes:

* Academic R&D is reported by fiscal year

Industry R&D funding is substantially higher than academic R&D funding. Per $1 million of GDP, industry R&D funding has not displayed any trend since the mid-1980s. Arizona’s industry R&D relative to GDP was higher than the national average from 1980 through 1985, but has generally been lower since then. However, Arizona’s figure has been similar to the national figure in some years since 2002.

Per $1 million of GDP, academic R&D funding has trended up. Arizona’s figure was greater than the national average from 1973 through 1996, by as much as 30 percent. It has been lower since 1998, by as much as 15 percent. The differential was 5 percent in 2013.

Visualization Notes:

The federal government is the largest source of academic R&D funding. Federal R&D funding per $1 million of GDP in Arizona has been less than the national average except in four years, most recently 1995. The Arizona figure was 29 percent below average in 2007. The 2013 differential was 16 percent. Institutional funding is the second largest source of academic R&D funding. Per $1 million of GDP, institutional R&D funding in Arizona has been greater than the national average since 1980, with very large differentials from 1984 into the 2000s. In 2013, Arizona’s figure was 26 percent higher than the national average.

The amount of academic R&D funding from state and local governments, industry, and other sources is considerably less than that from the federal government and institutions. Industry funding per $1 million of GDP was higher in Arizona than the national average from 1973 through 1995 and again from 2003 to 2006. However, the 2013 figure was 54 percent less than the national average. Funding from state and local governments in Arizona was 2.5-to-3 times as high as the national average between 1972 and 1983 but a precipitous decline in Arizona in 1984 put the value below average. Arizona’s figure in 2013 was 26 percent below average. Funding from other sources fluctuated in Arizona through 1993 but generally was close to the national figure. From 1995 through 2005, Arizona’s figure was far less than the national average. Since then, Arizona’s figure has fluctuated. In 2013, Arizona’s figure was 35 percent above average.

Data Source

National Science Foundation, Division of Science Resources Statistics. The industry R&D data are from the Business R&D and Innovation Survey: http://www.nsf.gov/statistics/industry/. The path to the table that provides the data used in Arizona Indicators is “geographic distribution/by state/funds: selected years.” Data for prior years may be revised. The tables are updated on an inconsistent basis; the latest data are sometimes reported in a “brief” that is released about 18 months after the end of a year. The academic R&D data, from the NSF Survey of Research and Development Expenditures at Universities and Colleges/Higher Education Research and Development Survey, are reported by fiscal year, available at https://webcaspar.nsf.gov/. The data are released around 18 months after the end of a calendar year; data for prior years may be revised.